CARMEL, Ind. -

It’s not just that the expectation that more vehicles will be coming out of leases this year. What also bodes well for increased off-lease volume at the auction is the economics of it all, says ADESA’s Tom Kontos.

Bottom line: dealers could be able to get their hands on more off-lease vehicles this year at the auction than before.

Kontos talked to Auto Remarketing on Thursday morning about this trend and others found in the latest issue of Pulse, ADESA Analytical Services periodic review of economic trends impacting the remarketing business.

Based on the various estimates from around the industry, the incremental change in off-lease volume this year is probably going to be an increase between 300,000 and 500,000 units from 2012, Kontos said.

“Now the big question is, how many of those units make their way back into the remarketing world?” he said.

It could be a higher percentage than before, Kontos noted, given the changing dynamics facing the grounding dealer who takes in an off-lease car.

During the past two or three years, Kontos explained, “the percentage of those (off-lease) vehicles that have been purchased by the grounding dealer has been high because they needed any source of used inventory they could get.

“They simply couldn’t obtain used-vehicle supply either at auction or through trade-in or any means in sufficient quantities to meet their retail demand. So, they were really opting to purchase as many of those off-lease units as they could and, thereby, sort of denying that vehicle to go downstream to an auction,” he said.

“I believe that trend is going to change going forward, because one reason the dealer was buying those cars is because they needed them; the second reason was that they were fairly economical to purchase because the residuals that were set on those vehicles were low relative to the market price at the time,” Kontos continued.  

“As we go forward and the market softens — and maybe even as residuals have been set a bit higher, based on the last couple of years of strong wholesale prices — we’ll see a reversal of that trend and more of the grounding dealers will pass on purchasing the car when it comes off lease, and they’ll take their chances at buying that vehicle at auction for hopefully a lower price.”

And the new-car market comes into play, as well; with sales improving from the 10 million annual sales level in 2009 to 14.5 million sales last year — and possibly 15-plus million this year — dealers are generating more trade-ins, meaning “they might not be quite as desperate for inventory,” Kontos said.

Editor's Note: Stay tuned to Auto Remarketing Today and Auto Remarketing Canada e-newsletters for more analysis from Kontos on the latest Pulse report.

Joe Overby can be reached at joverby@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.